Variable Interest Entity Structure as a Form of Investment Undertaken by Chinese Companies on Foreign Stock Exchanges

Sylwia Cieślik

doi:10.18778/2391-6478.3.31.01

Authors

Sylwia Cieślik University of Lodz, Faculty of Economics and Sociology https://orcid.org/0000-0002-8512-9983

DOI:

https://doi.org/10.18778/2391-6478.3.31.01

Keywords:

Variable Interest Entity structure, international capital market, China, investments, stock ex-change, investment risk

Abstract

The aim of the article: The purpose of this article is to discuss theoretical issues concerning the nature of the Variable Interest Entity (VIE) structure and to analyze the scale and functioning of companies using this structure to issue securities on foreign exchanges. The main research hypothesis was that the VIE structure is widely used by Chinese companies to issue securities on international stock exchanges.

Methodology: The basis of the research material are academic articles, reports of institutions and corporations, journal articles and other sources, as well as statistical data of companies collected on stock exchanges. Through analysis of stock market data, the authors sought to identify the number of companies operating under the VIE structure and determine the amount of capital invested on the largest international stock exchanges.

Results of the research: Empirical research indicates that the VIE structure is used by Chinese companies operating in sectors of the Chinese economy restricted by the authorities in order to issue securities, and thus raise the necessary capital for further development. The results indicate the large amount of accumulated capital, the huge number of entities involved in their operation, as well as the high risk associated with the investment.

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